RA12.4 REPORT FOR ACTION Waterfront Toronto Master Licence Agreement Date: July 3, 2018 To: CreateTO Board of Directors From: Head, Legal & Corporate Secretary Wards: Ward 30 SUMMARY CreateTO has been working closely with Toronto Waterfront Revitalization Corporation (TWRC) and City Divisions to facilitate the implementation of the Port Lands Flood Protection Project. While the Project will cause significant dislocation to Toronto Port Lands Corporation (TPLC) tenants and material loss of revenue in the short term, the long term results will be a signature new "City Building" addition to the Toronto waterfront, as well as enhanced value to the TPLC portfolio, which will now be "flood protected" for future redevelopment. TWRC will require continuing access to TPLC properties until 2024 for project construction. Rather than execute single purpose licence agreements on a property by property basis, TPLC and TWRC have agreed to enter into a master licence agreement (the "Licence") which will give TWRC access to all of the affected TPLC properties as and when required. RECOMMENDATIONS The Head, Legal and Corporate Secretary of CreateTO recommends that: (i) the CreateTO Board approve a master licence agreement (the "Licence") between the City of Toronto Economic Development Corporation ("TEDCO", acting as "TPLC") and Toronto Waterfront Revitalization Corporation ("TWRC") pursuant to which TPLC will licence approximately 30 of its properties in the Toronto Port Lands to TWRC so as to permit TWRC to undertake the Port Lands Flood Protection and Enabling Infrastructure Project ("Project"); and (ii) the CreateTO Board authorize CreateTO management to enter into the Licence on behalf of TPLC, and to take such steps and enter into such additional documents as Waterfront Toronto Master Licence Page 1 of 5 are necessary to protect the interests of TPLC and to facilitate the completion of the Project by TWRC. FINANCIAL IMPACT The entering into of the Licence by TPLC will have a significant impact on TPLC revenues from the Port Lands during the term of the Licence. Management has prepared a separate report to the Board on the financial impacts. DECISION HISTORY At its meeting on July 7, 2015 City Council adopted in principle the undertaking of a second phase of waterfront revitalization supported by tri-government funding and governance. Flood protection was identified as a priority capital project and the Mayor was asked to contact his provincial and federal counterparts to initiate a "Call to Action" negotiation process regarding funding for flood protection and other Waterfront 2.0 projects. http://app.toronto.ca/tmmis/viewAgendaItemHistory.do?item=2015.EX7.6 At its meeting on November 8, 2016, City Council directed the Mayor, the City Manager and the Deputy City Manager, Cluster B, to request the Government of Canada and Province of Ontario for a funding commitment for the Port Lands Flood Protection project - with a three-way cost-sharing arrangement between the three orders of government ($1.25 billion in total). http://app.toronto.ca/tmmis/viewAgendaItemHistory.do?item=2016.EX18.3 At its meeting on February 12, 2018 City Council authorized the City to enter into a Contribution Agreement with the Federal and Provincial governments and Waterfront Toronto for Port Lands flood protection. http://app.toronto.ca/tmmis/viewAgendaItemHistory.do?item=2018.EX31.2 (2w) COMMENTS The Port Lands Flood Protection and Enabling Infrastructure Project ("Project") is a transformative $1.25 Billion public infrastructure project that will change the face of Toronto's waterfront and the Port Lands for generations to come. The Project is a comprehensive project for flood protecting southeastern portions of downtown Toronto – including parts of the Port Lands, South Riverdale, Leslieville, south of Eastern Avenue and the First Gulf/Unilever development site that are at risk of flooding under a provincially-defined Regulatory Storm event. The Project involves substantial soil excavation and redistribution, as well as the creation of new earthworks, roads, bridges Waterfront Toronto Master Licence Page 2 of 5 and dockwall structures. The centrepiece of the Project will be a re-naturalized mouth of the Don River containing new parks, spillways and marshes. TPLC is a large land owner in the western Port Lands area, and much of the Project will occur on TPLC lands. As the Project has begun to ramp up, TPLC has assisted TWRC in the early phases by providing temporary access to TPLC lands for Project planning and early site work undertakings. The Cherry Street land fill project has been the major focus of TWRC's efforts to date. TPLC has also been conducting an extensive engagement process with its tenant community to manage the tenant terminations and relocations that will be required in order to permit the Project to proceed on the TPLC lands. The Port Lands encompass approximately 800 acres of property, of which TPLC owns and manages approximately 425 acres. The flood protection project requires TPLC to hand over approximately 160 acres, or 37% of TPLC's property portfolio, to Waterfront Toronto under the Licence. Current estimates by TPLC are that approximately 90 acres of TPLC land will be needed in perpetuity for the new Don River mouth and for sediment management and flood protection landforms, as well as roads, bridges and other infrastructure. This land will be transferred from TPLC to appropriate City Divisions or the Toronto and Region Conservation Authority over time. Approximately 70 acres of developable land will be available to TPLC after Project completion. TWRC now wishes to engage in the next phase of the Project, which will require continuing access to TPLC properties until 2024. Rather than do single purpose licence agreements on a property by property basis, TPLC and TWRC have agreed to enter into a master licence agreement (the "Licence") which will give TWRC access to all of the affected TPLC properties as and when required. The first TPLC property to be handed over to TWRC effective July 1, 2018 will be the site at the corner of Cherry and Commissioners which has been commonly associated with its regular use by "Cirque de Soleil". Additional TPLC properties will be handed over to TWRC in accordance with an agreed upon schedule which is included in the Licence. Previous Approvals: On August 11, 2017, the previous Board of TPLC approved a licence agreement with TWRC for a period of two years (ending August 31, 2019) for nominal consideration. The licenced area was approximately 3 acres for use as a construction staging area for the Cherry St. storm water and lake-filling project. Loss revenue was estimated at $200K to $300K. The following note was recorded in the minutes: "Fee: Nominal Consideration of $10.00 - WT requested that TPLC waive its standard licence fee because it was a public project that is a priority for all three levels of government that have committed funds for (but which were specifically not allowed to be expended on rent under terms of the funding commitments from governments)." Note: previous site-specific licences to TWRC such as this one will be replaced by the master Licence once it is signed. The key terms of the Licence of which the Board should be aware are as follows: Waterfront Toronto Master Licence Page 3 of 5 1. Term: July 1, 2018 to March 31, 2024. The Licence contemplates that the TPLC properties will be handed over to TWRC in stages commencing July 1, 2018, with the final group of properties being handed over on July 1, 2020. This ensures that TPLC can co-ordinate its tenant relocations and preserve revenues from its tenant-occupied properties to the greatest extent possible. 2. Fee: there is no fee payable by TWRC for use of the properties. TPLC will also lose the rental revenues associated with the licenced properties for the Term of the Licence (outlined in separate report to the Board of Directors on its July 13, 2018 meeting agenda, "Update on Impact of Flood Proofing on Rental Income") 3. Handover Process: The TPLC properties are being handed over to TWRC in an "as is" condition, and TWRC will be solely responsible for operation and use of the properties during the term of the Licence. The Licence contains the typical requirements that TWRC maintain appropriate insurance, respond to all complaints about its activities, handle any government enquiries or orders, and generally assume full responsibility for the TPLC properties during the term of the licence. 4. Environmental: TWRC is aware that the TPLC properties may be contaminated, and the parties have shared "baseline" environmental information about the condition of the properties. During the term, TWRC intends to use some of the TPLC properties for soil and groundwater remediation activities. TWRC intends to complete a "Community Based Risk Assessment" ("CBRA") of the properties as part of the Project. 5. Handback of Properties: At the end of the term, the TPLC properties will be returned to TPLC free of "Pollutants" (except as may have existed at the beginning of the term, and recognizing that the properties will be used for the storage and processing of contaminated soil and groundwater) and in accordance with the CBRA. In addition, TWRC will provide TPLC with soil quality and tracking information for any soils moved within or on the properties. A "Handback Plan" will also be agreed with TPLC that will detail the handback condition of each of the properties, including such issues as grading, soil compaction, surface treatment etc. Important Note: significant portions of the TPLC properties will be subject to further transfer by TPLC at the end of the Licence term. These areas will converted to riverbed and parkland, as well as roads, bridges and other infrastructure and will be ultimately conveyed to City Divisions or to the Toronto and Region Conservation Authority.